Why Government tax on Crypto if it can't be used in the country?

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We have read many posts on how governments of certain countries are putting heavy taxes on cryptocurrency holdings despite not supporting their use for physical goods in the country. One may argue that since fiat money is used to purchase this digital currency, there are adverse effects it will have on the economy of the country since the money won't be in circulation within the country, except when converted back to Fiat.

Now, the question is, why can't it be given full support since the proceeds from it are taxed?

For cryptocurrency to be taxed, means it is profitable. This is something the governments know but they are not ready to acknowledge it, possibly out of fear of losing their financial power to it.
It feels sad to read about the heavy tax on Cryptocurrency users in India especially considering that these people are not allowed to use crypto in the country. I believe it is fair when crypto is used in countries where it is taxed. It makes it easier for users to transact. There is usually the stress of converting Crypto to Fiat to use the money in the country. If Crypto is allowed to be used in a country where it is taxed, users will be able to save time and fees paid during conversion to fiat.

The blockchain may be open to all but the identity of the users aren't. So, I do wonder how governments can track a citizen's portfolio and be able to tell his net profit and the tax to be paid. It is even more difficult to comprehend this whole idea of cryptocurrency taxation with the presence of peer-to-peer trading.
Before the advent of cryptocurrency and other digital currencies, sending money to people from other countries has been a difficult task. We struggle with long queues in Banks, wait for days before the money is confirmed, and still pay heavy fees on it. Digital currencies closed this gap and people can receive and send money from anywhere in the world with fewer fees. The usual response from the government is the fact that cryptocurrency creates room for Tax evasion. This might be true but there is also a way around it.

If governments can liaise with Exchanges, citizens can be made to carry out their crypto transactions through the said exchanges. This way, they can monitor what's happening through exchanges. I know that this kills the whole idea behind Cryptocurrency but the fact remains that we can't have the government accept something they do not have full control on. This is why we are seeing all the regulatory sanctions on cryptocurrency projects. Currently, the former CEO of Microstrategy, Micheal Saylor is on trial for tax evasion, and he may end up paying close to $100 million for the offense. It was assumed that part of the reason behind his Bitcoin acquisition was to evade tax, with the information he released about having 18,000 BTC as of 2021, he may not easily come out of it.
Is sad but the reality is the government will not give crypto the support it deserves but will seek ways to reap from it.